When answering the question of investing in property versus shares the important thing to remember is that this is a question purely based on preference, risk and return, not one of tax effectiveness because if these two very different products are used in the same way, both can provide the same tax benefits.
For a while now some Financial Planners have been preaching how shares have been a better investment than Property; over the last few years few would argue, that is until share prices plummeted recently.
When investing in Real Estate you will find that over recent history say the last 50 years, you would have trouble finding a time when prices have fallen more than 10%. However with stocks and shares whilst you can make quick gains you are exposed to equally large and sudden losses.
Andrew (Twiggy) Forrest of Fortescue Metal fame was listed as being worth $13 Billion just months ago but with the recent decline in FMG share prices his wealth has dropped to $1.3 Billion robbing him of his short lived crown as Australia’s wealthiest person.
Now the rise and fall are fine and just a normal part to investing in shares. The thing with shares is that the people who will usually get caught out are the novice investors who jumped on to late and paid $12 odd dollars a share because everyone else was making profits. These people still own the same shares which are now worth $1.29 or there about. This can happen in reverse, however usually happens to the professionals who study the markets as a job.
If the same investor spent his money on property they may be down about 5% at the moment which is a normal part of any property cycle, the idea is to be in a position to ride out the storm as property always eventually recovers and goes up, up, up. This unfortunately can’t be said for shares which sometimes completely collapse leaving the investors substantially out of pocket.
In short both investments involve risk; the difference is the size of the risk. If you can hold on through the tough spells property always increases in value over time.
The only question you need to ask as an investor is how long I will have to wait to double my money; the answer is usually 7-9 years. With shares this increase can happen a lot quicker but you can also lose the lot just as fast.